MOSCOW, June 15 (Reuters) - China and Russia have failed to come closer in tough price talks between their national energy giants despite hopes that President Hu Jintao's visit to Moscow would herald a breakthrough.
Negotiators for China National Petroleum Corp (CNPC) have signalled they will pay no more than $250 per thousand cubic metres, sources at Gazprom said on Wednesday.
"This is the price formula which includes a discount for China, which would result in an average price no higher than $250 (per thousand cubic metres) a year," said one of the sources, who is familiar with Gazprom’s negotiating position.
That leaves the two sides still far apart on price after five years of talks on Russian gas deliveries to China.
Russia’s government had hoped for a price deal in time for Hu’s visit to Russia this week.
Hu is due to meet Prime Minister Vladimir Putin on Thursday at Gazprom’s blue glass tower in southern Moscow, then move on to Russia’s annual economic forum in St Petersburg, where he is the guest of honour.
A second source said China was aiming for $235, in line with the price paid by Chinese gas processing facilities in the its northeast.
Russia’s gas export monopoly is still targetting a price that will make deliveries to China as profitable as those to their European clients.
"They can’t get the same price as they do in Europe. There are no transit countries between Russia and China," one of the sources said, referring to the cost of gas transit to Europe through Russia’s Western neighbours, Ukraine and Belarus.
Sources have said Russia has sought an outright level of $300 or more.
"I do not believe China can afford to take the $300 per thousand cubic metre price. Even $260 is too high. It seems the Chinese price of the $235 looks reasonable," said Keun-Wook Paik, a senior research fellow at the Oxford Institute for Energy Studies who is due to publish a book on Chinese-Russian energy relations.
Under early terms hammered out over five years by Russian and Chinese negotiators, Russia will deliver 30 bcm per year from fields on the Arctic Yamal peninsula, the same fields which supply Europe, via pipeline through the Altai region to northern China.
China’s president has made it a diplomatic priority to secure energy supplies for the rapidly growing, resource hungry economy. He would also like to contract an additional 38 bcm from yet untapped fields in East Siberia.
In recent talks in Moscow, Chinese negotiators won Russian consent for an eastern pipeline route from those fields in addition to the Altai route long favoured by Gazprom.
As talks have dragged on between Russia and China, however, China has increased its purchases of gas from Russia’s rivals in central Asia, the former Soviet states of Uzbekistan and Turkmenistan.
"If Gazprom fails to make a compromise," Paik said, "China will have no other choice but to find an alternative supply source."
